The Development of City Systems in Africa

2nd Oct 2017

Authors: Sebastian Kriticos, Vernon Henderson

Since 1960, urbanisation in Africa has soared from 15 percent to around 40 percent today. According to the UN, that figure should reach 60 percent by 2050. How and why urbanisation is taking place is paramount to the development of African economies, yet the basic facts of the process remain a puzzle to social scientists and policy-makers alike. In a recent working paper, we review the new literature on African urbanisation, attempting to sort out why it is occurring as well as key parts of the traditional urban literature that relate to Africa. 

 

There are three major puzzles of African urbanisation. First, contrary to standard structural change models, urbanisation in Africa is proceeding without the development of significant and competitive manufacturing sectors. In fact, as table 1 shows, manufacturing has been in decline since the 90s, having peaked at 13 percent in 1991, before falling to 8 percent today – well behind the levels once reached in East Asia or Latin America. Similarly, while services contribute highly to African GDP, there’s been limited development of tradable service employment such as financial and business services.

DevAfSystem1

Second, Africa has experienced extremely limited agricultural transformation. Relative to the rest of the world, Africa has not only performed consistently worse in terms of cereal yields, but has shown little evidence of catch-up with other regions since 1960 (figure 1).

DevAfSystem2

 

Finally, Africa is urbanising while poor, indeed strikingly poorer than other world regions when they reached similar levels of urbanisation. This rapid urbanisation at low income levels is typically accompanied by very high concentrations of people in primate cities, bringing the added issue that low incomes imply a general lack of institutional development and infrastructure needed for large cities to function effectively.

Urbanisation and structural transformation

Generally we explain urbanisation through two forces. The first being through green revolution: productivity gains in agriculture alleviate food constraints and release labour to move to cities. Think of England in the 1600s - when agricultural yields doubled before the onset of the industrial revolution - or of China in the post-Mao reforms. The second factor is of course, industrial growth. With the cities come the factories and services that benefit from proximity to labour, capital, and neighbouring firms. As agriculture is land intensive, there should be limited incentive for primary sector employees to congregate in cities; for manufacturing and services, however, capital substitutes for land and agglomeration economies increase the efficiency of production.

The Case in Africa

Given the facts cited in the introduction, with neither agricultural push nor industrial pull, why are people moving to cities in Africa so quickly? Recent theory considers the plausibility that resource export earnings can drive a movement to consumption-based cities and an increasing labour share in nontradable activities (Gollin et al. 2016).

A key motivating facts for this argument is to examine two pairwise graphical relationships. One relates the urbanisation level to the share of GDP in manufacturing and services, and the second the urbanisation level to the share of natural resource exports in GDP. For Latin America and Asia, we see a clear positive association between the share of manufacturing and services in GDP and the overall level of urbanisation (Figure 2). In contrast, there is no such association between industrialisation and urbanisation in Africa. In Africa, urbanisation instead appears to be positively associated with the share of natural resource exports in GDP.

 

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Upon further scrutiny, the argument doesn’t seem to be the main story about African urbanisation. One issue is that the above graphics focus on bivariate relationships between urbanisation and resources and then urbanisation and industry; in fact, once we look at them together in a regression framework, the patterns of correlation fade away. We do this in our paper and we note that for Asia, the results show that both industry and resources are significantly and positively associated with urbanisation. However, once we include interaction terms the net effects for Africa are small and insignificant, implying that within Africa, countries with either more industry or greater resource income are no more urbanised than the continent’s average country.

Employment in African cities

The key follow-up question is: what are people actually doing in African cities versus the rest of the world? We answer this and some later questions by compiling a dataset on African cities in 34 countries. Here we examine 11 of those for which we have sector-level data on city employment in the 2000s. From the most to least populous, the 11 countries are Ethiopia, Tanzania, Uganda, Mozambique, Ghana, Cameroon, Mali, Malawi, Zambia, Sierra Leone, and Liberia. The full sample corresponds to a population of around 242 million individuals: 62 million in urban areas and 180 in rural.

We note that Africa’s share of primary sector activity in urban areas ranges from 12.7-45.8%, with a mean of 25.7%. Outside of Africa, the range is between 4.1-14.4%, with a mean of 10% and with countries like India at 7.4%. There is a clear pattern of a much greater role of farmers in cities in Africa. The Africa minimum in the 2000s is above the mean of the other countries and not far from their maximum. For the economy as a whole, agriculture practically forms the entire basis of employment in the rural sector, with 90.1% of working individuals in that sector. This makes Africa an international outlier.

Looking within the urban hierarchy, Figure 3, shows how outside of the primate city, agriculture plays an even greater role.[1] What is astonishing is the extent of agricultural employment amongst urban residents in the second quartile and bottom half of cities by size, at over 40%. Perhaps more troubling is the small role for manufacturing and tradeable services (finance, insurance, real estate and business services) in primate and secondary cities, at around 8-12% – despite the agglomeration opportunities – not to mention their miniscule role in other cities. The chief purpose of cities in the bottom 75 percentiles and even in the upper 25 appears to be housing and servicing (‘trade’) farmers in the cities and surrounding areas.

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Conclusion

Agriculture remains a big venture in Africa with capacity not just for improvement in technology and farming practices but also for expansion of farming area and intensity of farming. While there are arguments about consumer cities, urbanisation in Africa, compared to the rest of the world, appears to be less driven by either natural resource incomes or industrialisation. Instead, urban residents in the bottom ¾ of the city size distribution appear to be still heavily engaged in agriculture as their main occupation.

While the literature suggests there are vast productivity wins to be made from transitioning towards nonagriculture (see Gollin et al. 2014), the problem today seems to be that structural transformation and urbanisation in Africa are not well linked: hence the widespread presence of farmers in most cities. Smaller cities near the bottom of the size distribution tend to be growing faster than larger secondary (but not primate) cities, and seem to exist to serve agriculture and to house farmers – with their fortunes perhaps rising with improved productivity in farming in recent years. In comparison larger secondary cities appear to be stagnant and with scant evidence of any real industrialisation in all but a tiny handful of cities. In other parts of the developing world, larger secondary cities tend to be thriving due to industrialisation, but in Africa there is so little industry nationally that the role and prospective growth of secondary cities is challenged.

 

 References

  • Gollin, D., Jedwab, R., & Vollrath, D. (2016). Urbanisation with and without Industrialisation. Journal of Economic Growth, 21(1), 35-70.
  • Gollin, D., Lagakos, D., & Waugh, M. E. (2014). The agricultural productivity gap”. The Quarterly Journal of Economics, 129(2), 939-993.
  • Henderson, J. V., Storeygard, A., & Deichmann, U. (2017). Has climate change driven urbanisation in Africa? Journal of Development Economics 124, 60–82.
  • Storeygard, A. (2016). Farther on down the road: transport costs, trade and urban growth in Sub-Saharan Africa. The Review of Economic Studies, 83(3), pp.1263-1295.

 

[1] We define cities and their boundaries using night lights data, defining cities as the envelope of contiguously lit areas. See Storeygard (2016) and Henderson, Storeygard and Deichmann (2017) for a review of this methodology.